Regulatory: Orwell Meets the SEC

Shareholder democracy took a turn for the worse recently.  The SEC has told public corporations that they would have to subsidize shareholder proposals urging the companies to take a lobbying position in favor of universal health care. Boeing, General Motors, United Technologies, Wendy's International and Xcel Energy have all received word from the SEC that they'll have to include these shareholder proposals in the official proxy materials –so says The New York Times.  In one sense, the shareholder proposals urging universal health care are less than contemptible.  Companies cannot will universal health care into existence.  The proposals are wishing for something as an official corporate policy.

 

In addition, asking shareholders to opine on health care policy threatens to complicate the process of corporate governance.  It risks distracting shareholders from more fundamental management issues such as board membership.  It increases the cost of shareholding: now responsible corporate citizenship requires you bone up on health care policy too.

 

Most importantly, these proposals might actually be dangerous. The combination of so many government arms (party machinery, congressional committees, regulatory agencies--by lobbyists for special interests) is well-known, and viewed by many as a serious threat to democratic legitimacy (the best that can be said is that competition between special interests acts as a kind of check-and-balance mechanism).

 

Shareholder proposals about universal health are likely to be captured by special interests, especially labor unions acting through labor dominated pension funds.  Handing control of corporate lobbying efforts over to these interests could remove the check-and-balance aspect of corporate lobbying.

 

Law professor Larry Ribstein of the University of Illinois suggests ways to deal with this issue. 

In short, this proposal is useless, unduly costly and possibly dangerous.  

 

 

We've arranged for a number of industry experts to provide in-depth guest commentary on cardiology topics such as technology trends, hot sectors, challenges, and global growth. Guest columnists begin with Michael Mussallem, CEO of Edwards Lifescience.  Look for his interview within the next 2 weeks. We are always open for more contributors. Drop me a line if you want to recommend a Statesman – all communication is confidential.

 

 

If you want exposure to contract manufacturing crossed with generic drug manufacturing, let me know – we’ve got the client (less the risks listed at the end…).

 

Let me remind you of the opportunity.

 

Drugmakers are pulling out of manufacturing at an unprecedented rate, according to a new report from IMS Health. Four of the top 10 pharma players announced big new outsourcing programs last year. That's evidence that pharma execs are thinking in vastly different ways from their predecessors, who believed R&D and manufacturing had to work hand-in-glove, and that the skills required to make drugs couldn't be found in emerging markets.

 

This shift toward contract manufacturing has risks, IMS concludes. First, there are safety concerns. Just think of Baxter's heparin supplier Scientific Protein, which made crude heparin in partnership with a Chinese manufacturer whose plant was riddled with problems when the FDA finally inspected it after millions of doses of the blood thinner had to be recalled. Then there's Sanofi-Aventis, whose contract manufacturer went bankrupt, leaving Sanofi to deal with its manufacturing breaches. Secondly, in other industries, contract manufacturers have found ways to enter the market as competitors. Finally, there's economic implications of shipping work to emerging markets. Europe, for instance, counts 640,000 pharma jobs. If they are perceived to be under threat from outsourcing, politicians might intervene and change prevailing laws and regulations.